Bonds Rally on Political and Economic Unrest

U.S. 10-year bond prices rallied today on slowing U.S. economic growth and
jobless claims at 2-year highs. The assassination of Benizar Bhutto also helped
to boost bond prices, as traders bought bonds as a safety from political
instability in the Middle East. Bonds typically rise on economic weakness and
fall on strength, so today’s events in the Middle East and U.S. economic reports
clearly came in as a negative for most traders.

The dollar fell against the yen and the euro today, after disappointing
growth numbers were released in the U.S. today. The assassination of Pakistani
opposition leader Benazir Bhutto also helped to dampen any positive U.S.
sentiments. Bhutto was killed in a suicide bombing following her first political
rally in the country since returning in October. Most of the action today concerned dollar weakness. The euro was up
moderately versus the yen.

Crude oil rallied to 1-month highs above $97 a barrel today, after the U.S
Energy Department recorded its lowest stockpiles in over 2 years. Crude fell off
recent all-time record highs just under $100 on U.S. economic demand worries.
However, crude has bounced back and is now trading just off those highs. Natural
gas futures rallied fractionally.

Gold futures rallied about 0.2%, in line with dollar weakness and rising
energy prices. Gold normally trades inversely to the dollar and with crude oil,
which is exactly what happened today. Bhutto’s assassination also helped to
drive gold prices higher. Copper futures fell about 1.2% today.

Grains were mixed. Soybeans fell 0.6%, while corn rallied 0.6%.


Economic News

U.S. durable goods orders fell more than
expected in November.